Assume that houses in an area appreciate at the rate of 4 percent a year.A borrower expects to have a loan-to-value ratio of 90 percent.What is the approximate expected appreciation rate on home equity (EAHE)?

Question

Quizplus · Accepted Answer

The expected appreciation rate on home equity (EAHE) can be calculated by dividing the annual appreciation rate by the initial equity percentage. With a loan-to-value ratio of 90%, the initial equity is 10%. Therefore, EAHE = 4% / 10% = 40%.

Assume That Houses in an Area Appreciate at the Rate